Kazakhstan Uses Digital Tenge for Rail Construction Payment to China

Points

• Kazakhstan launches a pilot project using its digital tenge CBDC for rail construction payments.
• The project ensures transparency and efficiency through programmable CBDCs.
• The digital tenge project is part of Kazakhstan’s broader CBDC rollout, expected by 2025.
• The initiative highlights the potential of CBDCs in enhancing government spending accountability.

Kazakhstan has initiated a pilot project to use its central bank digital currency （CBDC）, the digital tenge, to pay for the construction of a rail line to China. This project marks the beginning of the second phase of the digital tenge’s introduction and aims to ensure transparency, targeted use, and efficiency in government spending.

The digital tenge is used to make payments for the rail line construction between Moyynty in central Kazakhstan and Dostyk on the Chinese border. This rail line is a crucial part of the Belt and Road transit corridor, linking China with Western markets.

The pilot project involves marking the digital tenge to ensure that funds are disbursed only to organizations that have fulfilled their contractual obligations. This programmability feature allows for precise control over the allocation and use of funds, minimizing the risk of misappropriation.

According to the National Bank of Kazakhstan （NBK）, the marked digital tenge was used to pay contractors upon the completion of work. This process was integrated with existing interfaces of market participants, ensuring seamless transactions and compliance with project requirements.

Money from Kazakhstan’s National Fund sovereign wealth fund was utilized for this project. The government and the state Anti-Corruption Agency plan to expand the use of the digital tenge to other sectors, including agriculture, construction, and social benefits.

The first phase of the digital tenge pilot concluded in December, encompassing a wide range of functions, from providing free school lunches to implementing cross-border payments on the SWIFT system. The Kazakhstan CBDC infrastructure has been integrated with the BNB Smart Chain, aiming for a full rollout by 2025.

The programmability of CBDCs, like the digital tenge, offers significant advantages for government spending. It ensures that funds are used as intended, enhancing transparency and accountability. However, the use of programmable money also raises concerns about potential restrictions on how funds can be used by recipients.

As Kazakhstan continues to develop its CBDC, the success of these pilot projects will provide valuable insights into the practical applications and benefits of digital currencies. The initiative demonstrates the potential of CBDCs to transform financial systems and improve the efficiency and transparency of government operations.

解説

• Kazakhstan’s use of the digital tenge for rail construction payments highlights the potential of CBDCs to improve the efficiency and transparency of government spending. Programmable CBDCs can ensure that funds are used as intended, reducing the risk of misappropriation.
• The pilot project showcases the practical applications of digital currencies in large-scale infrastructure projects. By integrating CBDCs with existing financial systems, Kazakhstan is paving the way for more widespread adoption of digital currencies.
• As countries explore the use of CBDCs, the success of Kazakhstan’s digital tenge project could serve as a model for other nations. The benefits of programmable money in enhancing accountability and transparency could drive further innovation in the financial sector.